KKR, Apax Said Among Buyout Firms Weighing Offers for Telesat

Feb 13, 2014 12:01 am ET

Feb. 13 (Bloomberg) -- KKR & Co., Apax Partners LLP and Canada’s Onex Corp. are among five private-equity firms weighing bids for Canadian satellite company Telesat Holdings Inc., people with knowledge of the matter said.

Telesat, which owns and maintains a fleet of satellites, is jointly owned by Loral Space & Communications Inc. and Canada’s Public Sector Pension Investment Board. Any deal would require both owners to sell, according to the people, who asked not to be identified because the negotiations are private. The sellers are seeking a price of about $6.5 billion in a deal that could be completed by April, one of the people said.

Carlyle Group LP and Canada Pension Plan Investment Board are also considering making offers, the people said. Several of the firms looked into buying Telesat in 2011, when the Ottawa- based satellite owner ran a failed auction, the people said. The company is probably already priced for a sale, limiting any premium a buyer would be willing to pay, the people said.

The process will be culled to one or two offers in March, the people said. At that point, a winning bidder will need to negotiate a deal with both Loral, which owns 63 percent of Telesat, and PSP, which owns the remainder of the company and controls 67 percent of the voting rights, said the people.

Loral climbed 3.2 percent yesterday in New York. The stock had declined 5.7 percent this year through Feb. 11.

Blocked Sale

The transaction is complicated by the relationship between Loral’s largest shareholder, Mark Rachesky, Carl Icahn’s former chief investment officer, and Canada’s PSP, the people said. The two sides previously didn’t speak with each other, making a joint transaction tricky, they said. Another person familiar with the situation said the two sides are now in sync and spoke at the last board meeting. Rachesky’s MHR Fund Management LLC owns about 38 percent of Loral, according to data compiled by Bloomberg.

Rachesky blocked a sale in 2011 when he didn’t receive a high enough price from either KKR or Carlyle, which were both interested in the asset, the people said. PSP was willing to sell then, one of the people said, while Rachesky got to within $100 million of striking an agreement before deciding not to do a deal.

Spokesman for Telesat, Loral and PSP declined to comment. Representatives for Apax, Canada Pension and KKR also declined to comment. A spokeswoman for Onex didn’t respond to an e-mail and voice message seeking comment.

Loral and PSP acquired Telesat from Canadian telecommunications company BCE Inc., a deal announced in December 2006 valued at about $3 billion including debt.

Telesat owns 14 satellites and manages the operations of satellites for third parties, according to its website. The company was founded in 1969 and launched the world’s first commercial, domestic communications satellite in geostationary orbit in 1972.

The New York Post reported Rachesky’s interest in selling his stake in Loral in October. Reuters reported Loral management was exploring a sale last month.

--With assistance from Katia Dmitrieva in Toronto. Editors: Mohammed Hadi, Nick Turner